The Fed’s Medicine Makes the Economy Sicker – Ep 556

* We had a very significant day in the currency and gold markets yesterday * We had some good follow through today that really buttresses the point that I want to make * We got some economic news that was released yesterday that would have been considered bullish for the dollar and bearish for gold * By most people, other than me, who trade currencies and who trade gold * But the fact that gold did not sell off or the dollar did not rally was very significant * The news was the CPI and Retail Sales * First of all, Retail Sales came out stronger than expected, they were looking for a gain of .1% and we got a gain of .4% * They actually revised the prior month's gain from +.6% to  +.1% * Now a lot of the gain in retail sales, though has to do with the fact that prices are higher * Retail sales are not adjusted for inflation * Prices are going up * Retail sales may be going up, particularly things like gasoline * It's not just the price of gas that's going up; everything is going up * The CPI came out at the same time as Retail Sales and that is the bigger number * We got a .6% rise in consumer prices * That's versus the expected .3% * Even the core - you take out food and energy - we were up .3% there versus an estimate of .2% * Year over year CPI 2.5% that's the official number * Obviously prices are going up a lot faster than that but according to the government they're going up at 2.5% * Even if you take out food and energy and just look at the core, year over year the change is 2.3% * Now remember the Fed is saying their target is 2% * When Janet Yellen testified this week she said that she's confident this week that we're going to hit her objective * Well, we've already surpassed her objective Our Sponsors: * Check out Aeropress and use my code GOLD for a great deal: https://aeropress.com * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Infinite Epigenetics: https://infiniteepigenetics.com/GOLD * Check out Justin Wine and use my code SCHIFF20 for a great deal: https://www.justinwine.com Privacy & Opt-Out: https://redcircle.com/privacy

17 Feb 201729min

* Today Janet Yellen was up on Capitol Hill, it was the first of her 2-day testimony * She was before the U.S. Senate today; tomorrow she will be testifying before the House of Representatives * She talks about monetary policy; we have a bunch of Senators and Congressmen who engage in political grandstanding * To me, a lot of the people asking Janet Yellen questions are really just trying to speak for sound bites for the media, trying to score brownie points for their constituents *  One senator had to make some comment about global warming - do you think global warming is one of the things the Fed considers when it sets monetary policy? * Elizabeth Warren is trying to get Janet Yellen to criticize the Trump administration's efforts to pull back Dodd-Frank * Because she believes it was the bank that caused the financial crisis * She doesn't lay any of the blame at the foot of Congress or the Federal Reserve or the artificially low interest rates * She thinks it was just Wall Street greed that blew up Wall Street and that the reason we haven't had another financial crisis was because of the great legislation Dodd-Frank * And that somehow, if any bit of that is rolled back,  it's going to unleash another wave of rampant Wall Street speculation and blow up the economy all over again * Probably one of the dumbest comments from one of the senators is why we need more minorities on the Federal Reserve * The senator commented to Janet Yellen that we needed more African Americans on the Fed because they represent a significant percentage of the population, of the work force, and they need some representation at the Fed * I'm thinking, "What is this guy talking about?" * Do you have to be black to conduct monetary policy on behalf of other blacks? * Does that mean that only whites can conduct monetary policy for whites? * What is black monetary policy? Our Sponsors: * Check out Aeropress and use my code GOLD for a great deal: https://aeropress.com * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Infinite Epigenetics: https://infiniteepigenetics.com/GOLD * Check out Justin Wine and use my code SCHIFF20 for a great deal: https://www.justinwine.com Privacy & Opt-Out: https://redcircle.com/privacy

15 Feb 201732min

* I will be in Orlando tomorrow for the Money Show * I will be there Wednesday and Thursday returning Friday * I have several speaking events, a couple of workshops * If you're in the Orlando area, come by, it's free to register online * You can pick up your badge on site * We'll have a booth in the exhibit all, you can come by and meet some EuroPac employees * We look forward to seeing clients and listeners * Last week I spoke about President Trump and his weak dollar policy * He thinks the dollar is too low, the euro is too low, the yen is too low, the Chinese yuan is too low *  Over the weekend Germany's finance minister came out and agreed with President Trump * He agrees that the euro is too low * We know that the Bundesbank does not approve of the easy money policies, the QE, the negative interest rates that Draghi and the ECB have force upon them * I believe that rising German opposition as well as rising inflation both in Germany and throughout the European union will ultimately force the ECB to abandon their monetary policy * Maybe even at the same time that the Federal Reserve is finally admitting that they're about to ease again * We got the jobs numbers on Friday, I did a video blog about it * To me, the numbers seem troubling for the Fed because even though we created better than 200,000 jobs the number of people who rejoined the workforce, who now want jobs jumped dramatically * So you have a lot of people looking for jobs; the jobs aren't there * So the unemployment rate is going to come up * There will be wage pressures, and that is going to push the Fed in an easing direction * In fact, we got some numbers that came out today on Consumer Credit * Credit card debt grew by the smallest amount since 2013, which is a good thing * We don't want consumers taking on credit, it's bad economically to borrow money to consume * I really made that point in my book, "How an Economy Grows and Why it Crashes" * If you haven't read it, pick up a copy at schiffbooks.com * The point is, it's good that consumers are taking on less debt * Of course, if you're a retailer, and you're depending on those indebted consumers to go deeper into debt to buy your stuff, that's a bad sign Our Sponsors: * Check out Aeropress and use my code GOLD for a great deal: https://aeropress.com * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Infinite Epigenetics: https://infiniteepigenetics.com/GOLD * Check out Justin Wine and use my code SCHIFF20 for a great deal: https://www.justinwine.com Privacy & Opt-Out: https://redcircle.com/privacy

8 Feb 201732min

* Yesterday we got the first jobs report of the year and the way Wall Street and the media seem to be spinning it: * "It was a good report!" * It was good news because the headline number beat expectations: * We created 227,000 jobs in January vs the 175,000 that had been expected * Of course it was an improvement on the 157,000 jobs which was a disappointing report in December * But once again, if you look beneath the headline number, you'll find that there are a lot more problems to this report than the media is reporting * First of all, as always, the lion's share of these jobs are lower-paying service sector jobs * They're in retail trade, leisure and hospitality * So we're not creating the types of jobs that will Make America Great Again * In fact, if you look at the higher paying jobs - manufacturing, mining logging * These jobs are barely adding workers, if not losing workers * But the bigger story here has to do with what's happening to labor force participation, wages and unemployment * The official U3 Unemployment rate went up from 4.7% to 4.8% * The more revealing U6 number, which I think paints a more accurate picture of the true state of the labor market * That went up from 9.2% to 9.4% * Even Donald Trump, when he was campaigning, said that that number was far more accurate than Obama's official numbers * Why did the unemployment rate go up so much, considering that we had 227,00 jobs created? *  The reason was that we had over 700,000 workers re-enter the labor force * This goes against the trend that has dominated the entirety of the Obama administration * Where we saw a mass exodus of workers leaving the labor force * In fact, the labor force participation rate went up in January from 62.7% to 62.9% * First of all, why did so many Americans decide to re-enter the labor force in January? * Maybe there are 2 possible explanations and maybe they're both accurate: * One might have to do with all the optimism surrounding the Donald Trump Presidency * Remember, Donald Trump campaigned that he was going to be the greatest jobs President * And it's possible that a lot of people believe that this is going to happen * So they are re-entering the labor force to land one of these great jobs that President Trump will be delivering * You have to enter the labor force in order to apply for one of these jobs * Another reason is that the people who have been "sitting out" of labor force participation * Maybe circumstances are finally catching up with them, maybe they're running out of money * Maybe the cost of living has risen to the point that they have to, by necessity, find a job Our Sponsors: * Check out Aeropress and use my code GOLD for a great deal: https://aeropress.com * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Infinite Epigenetics: https://infiniteepigenetics.com/GOLD * Check out Justin Wine and use my code SCHIFF20 for a great deal: https://www.justinwine.com Privacy & Opt-Out: https://redcircle.com/privacy

4 Feb 201734min

* The month of January came to an end, and it didn't play out the way most people believed it would * Remember when the year began, everybody was optimistic on the U.S. dollar * Remember I said that it was the most crowded trade * It was just like gold the year before * Everybody was convinced that now that Trump was President we were going to have all this fiscal stimulus * The Fed was going to be tightening rates more aggressively * The dollar had no place else to go but up; * Everybody started the year long the dollar * I just read that this was the worst January for the dollar in almost 30 years! * For all the fanfare and the hype about Dow 20,000 * The Dow was only up about .5% in the month of January * You would think that it was much higher than that * And of course, measured in any other currency, the Dow was down quite a bit * In fact, if you just look at our mutual funds * To just give you an example of what's going on overseas * First of all, our Gold Fund up 12% in the month of January * But my International Value Fund was up 6.5% in the month of January * That fund is the #1 fund on Morningstar so far in 2017 * It was also the #1 fund in its category of 400 or so for all of 2016 * And it's already the #1 fund for 2017 * But if you look at the returns that are being achieved internationally * Investing outside the dollar * Investing in gold stocks * That's where all the money is being made * It's not being made in the U.S. Stock Market * In other currencies, it's actually, it's only up in dollars * But it's down in terms of just about every other currency * So you wouldn't know that from listening to the pundits * Everybody is so excited about what's going on * Again this is probably how it all started when George Bush came in * People were still initially enthusiastic about what was going to happen * But the honeymoon didn't last long Our Sponsors: * Check out Aeropress and use my code GOLD for a great deal: https://aeropress.com * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Infinite Epigenetics: https://infiniteepigenetics.com/GOLD * Check out Justin Wine and use my code SCHIFF20 for a great deal: https://www.justinwine.com Privacy & Opt-Out: https://redcircle.com/privacy

2 Feb 201728min

* Earlier this morning we got the first look at Q4 GDP * As I suggested on the last podcast, in fact as I have been saying all along * We did see a sharp decline from the Q3 3.5% GDP * The consensus was for a 2.2% estimate for growth in Q4 * And we came in at 1.9% * Quite a way below estimates and psychologically below the 2% number * Part of the reason was a big drop in exports * I talked about this last quarter * One of the reasons we got that 3.5% jump in Q3 GDP * Was the big surge in soybean exports, because of a drought overseas * Which created a temporary increase for U.S. beans * The rest of it was an inventory build, which I still think needs to be worked off * In fact, I think we're going to work off a lot of it in the first quarter of this year * That's the first estimate, and, who knows, they may downward revise it the next time they give us the numbers * If you now take the first 3 quarters of GDP growth, and use the first estimate for Q4 * For the entire year of 2016 GDP grew at just 1.6% * That is the lowest number since 2009, tied with 2011, at 1.6% also * If you remember 2011 GDP growth was so weak that they launched QE3 for 2012 * So they ended QE2, the economy started rolling over * And when they got that 1.6% GDP for the entire year * The Fed very quickly came out and launched QE3 the following year to goose the GDP back up *  What are they doing now?  Not only is the Fed not preparing to launch another round of QE * They are tightening monetary policy * They're saying, "We're going to raise interest rates 3 times, even though GDP is as low as it has been for the entire "recovery' * Even though the economy is decelerating, we are going to sedate it with rate hikes Our Sponsors: * Check out Aeropress and use my code GOLD for a great deal: https://aeropress.com * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Infinite Epigenetics: https://infiniteepigenetics.com/GOLD * Check out Justin Wine and use my code SCHIFF20 for a great deal: https://www.justinwine.com Privacy & Opt-Out: https://redcircle.com/privacy

28 Jan 201735min

* Short and not-so-sweet.  Maybe that's how you would describe President Trump's inaugural speech * Which, I think was the briefest since Jimmy Carter * But now, Donald J. Trump is the 45th President of these United States * I did in general like his speech; I agree with much of what Donald Trump had to say * Talking about how bad things are in the U.S. economy * Yes, there were some people who benefited * People in Washington certainly benefited, certainly Washington has been booming, right? * Because they've been sucking all the wealth out of the rest of the country * So the bureaucrats and certain segments of the population have benefited * From central planning and central banking and the cheap money and the bubbles * But Donald Trump hit the nail on the head * When he talked about all the factories like tombstones littering the landscape * How our wealth has been sucked out * The Middle Class has been hollowed out and the country is hurting * All this is true, and I like the fact that he says we're going to take back the government for the people * Take it away from the elites, take it away from the bureaucrats and bring the power back to the people * All that is great. * The question is, What exactly does Donald Trump mean by that? * Does he mean, get the government off the people's backs? * Does he mean unshackle us from government * Get rid of all the regulations, get rid of all the taxes and government spending * Get rid of all the bubble blowing * Let's have sound money and higher interest rates * Let's have a real economy so that individual Americans can pull themselves up out of the ditch on their own? * That we can roll up our sleeves and work our way out of this gigantic hole that the government placed us in * And if it's going to be free enterprise, limited government and freedom? * Of that's what he means by "Taking back the government for the people" * Then, that's great * But what if he doesn't mean that? * What if he means a Trumpian "New Deal"? * What if he's talking about government proactively doing things to "help" the middle class * Like big spending on infrastructure, where the government employs the people directly * And creates jobs, like they did during the Great Depression? Our Sponsors: * Check out Aeropress and use my code GOLD for a great deal: https://aeropress.com * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Infinite Epigenetics: https://infiniteepigenetics.com/GOLD * Check out Justin Wine and use my code SCHIFF20 for a great deal: https://www.justinwine.com Privacy & Opt-Out: https://redcircle.com/privacy

21 Jan 201730min

* As I said on a prior podcast, this could be the first Presidential Honeymoon to end before the marriage officially begins * Donald Trump will not be sworn in until Friday * Yet the Honeymoon already appears to be over for the Trump Trade * The dollar continues to decline again today; gold continues to rise * Confounding the experts who, at the beginning of the year, predicted the opposite * Gold up again today about $14 it was up $4-5 yesterday, on the Martin Luther King holiday *  We're now at about $1217 for the price of gold * We're still below where we were the day Trump won * But this is the highest we've been in about 6 weeks, maybe more * It's certainly the highest for the year * Dollar down across the board; dollar index at the low for the year * Still up from Trump's victory but down quite a bit from the highs * Of course, other currencies, even though the dollar index is down 2% * You've got currencies like the Australian dollar up 4.5% * So that currency has pretty much recovered everything that it lost based on the Trump victory * Gold, although it hasn't recovered everything, it's still up almost 6% so far year to date * Silver's up better than 7% year to date * Gold stocks, look at the GDX, up 12% so far this year * That means that gold stocks by far is the top performing sector in 2017 * They were by far the top performing sector in 2016 * I actually think the out-performance in 2017 will be even greater than 2016 * The Dow, down again, at one point it was down close to 100 * Dow transports ended down over 100 * I think the Dow is basically flat on the year - slightly positive * The NASDAQ was down 35 points; S&P down as well * So U.S. stocks are barely moving * Foreign stocks - some of these emerging markets are up huge, especially priced in U.S. dollars * All the foreign markets, thus far in 2017 are beating the U.S. market * Again, that is not what all the experts were expecting from the Trump Rally Our Sponsors: * Check out Aeropress and use my code GOLD for a great deal: https://aeropress.com * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Infinite Epigenetics: https://infiniteepigenetics.com/GOLD * Check out Justin Wine and use my code SCHIFF20 for a great deal: https://www.justinwine.com Privacy & Opt-Out: https://redcircle.com/privacy

18 Jan 201729min